Interest rates curb NSW’s new tax take

The NSW government’s revenue from its new property tax has been lower than expected as higher interest rates curb the number of home purchases.

The controversial new tax, called the Torrens assurance levy, was introduced in July, ostensibly to help the government guard against property document fraud.

The property industry complained at the time that the tax was nothing more than a revenue-raising measure.

All up, the tax was expected to net the government $96 million this financial year.

However, in the four months from July to October, the government collected $9.3 million from the new tax, which charges buyers an extra 0.2 per cent on properties worth between $500,000 and $1 million, and 0.25 per cent for those valued at more than $1 million.

The biggest monthly take was in October, when $4.5 million was collected, but that was still well below the $8 million average monthly rate forecast in the budget.

Revelations of the lower tax takings come as Tanya Gadiel, the member for Parramatta, became the 20th Labor MP to announce she would not be contesting the next election for the Labor Party.

The 38-year-old’s pending departure is a blow for Labor, which is ­facing its worst electoral defeat since the 1930s.

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Parramatta is held by a margin of 13.7 per cent and a new candidate may struggle to hold on to the seat.

Meanwhile, the government said a softer property market and the gradual introduction of the new property tax were behind the lower than expected collections.

“Part of the fall in revenue projections can be ascribed to the softening of the property market and this is reflected in the lower auction sale clearances compared with 12 months ago," a spokesman for Planning Minister
Tony Kelly
said.

“Also, the exemptions for contracts entered into before July 1 meant the full income stream did not come on straight away."

However, the Property Council of Australia said the new tax was acting as a brake on investment.

“NSW needs to learn its lesson," the council’s state executive director, Glenn Byres, said. “You don’t encourage growth and investment by taxing it into ­submission."

Opposition Leader Barry O’Farrell has committed the Coalition to ­scrapping the tax if it is elected on March 26.

Mr Kelly announced the new tax in May, claiming it would strengthen security measures for land title and help fund liabilities related to property document fraud.

But a NSW Auditor-General’s report released last week showed the cost to the government of property fraud was relatively low.

About $3.5 million in claims was paid out during the year, the report indicated. This included compensation payments and legal fees.

As at June 30, there were 19 un­resolved claims worth an estimated $11.4 million. This was down from $13.9 million the previous year.

“The new tax was always a pure revenue grab and the figures now prove it," Mr Byres said.

Auction clearance rates have fallen over the past 12 months as higher interest rates act as a deterrent for home buyers.

In November in Sydney, clearance rates were 59 per cent, down from 69 per cent a year ago, according to figures from Australian Property Monitors.